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London
CNN
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The European Union may have just given Tesla’s future sales in the region a boost by placing tariffs on its China-made cars that are much lower than those imposed on rival electric carmakers.
The landmark decision comes two months after the European Union raised tariffs on all electric cars imported from China, citing “unfair” government subsidies that unjustifiably benefited the country’s electric car makers at the expense of European manufacturers.
Tesla, which has a factory near Berlin but exports many of the cars it makes in China to Europe, had requested it. The European Union is recalculating the interest rate, which was initially set at 20.8%.
The European Commission, the EU’s executive arm, set the rate at 9% on Tuesday.
This applies in addition to the EU’s existing 10% tariff on all electric vehicle imports, but is still far less than the additional tariffs of between 17% and 36.3% imposed on other Chinese automakers.
The European Commission said the tariff reflects the “level of subsidies” Tesla receives in China.
“The Commission verified the information during a visit to China and conducted the same checks as it did with a sample of other Chinese export products,” it added in a statement. CNN has contacted Tesla for comment.
Gregor Sebastian, a senior analyst at Rhodium Group, said he was “surprised” that Tesla’s additional tariff was set at “only 9%.” He pointed to local government loans the company has taken in Shanghai, as well as subsidized batteries from Chinese battery maker CATL.
“But it’s difficult to make a strong argument here without looking at all the inputs and methodology the Commission used,” he added.
The surcharges are “still a negative” for Tesla, he told CNN, but could give the automaker “some breathing room” compared to SAIC, its main competitor in Europe. “(SAIC) is going to really struggle.”
The state-owned Chinese automaker, which owns the popular MG car brand, was hit with an additional 36.3% tariff, designated for “non-cooperative companies,” according to the commission.
Geely, which owns Sweden’s Volvo, was hit with an additional 19.3% tariff. Cars made by BYD, which competes with Tesla to be the world’s biggest seller of battery-powered electric vehicles, are subject to an additional 17% tariff.
The commission said the tariffs were slightly lower than those proposed in June after a more thorough investigation and input from carmakers.
Some Chinese companies in joint ventures with EU automakers may also benefit from the lower tariff, set at 21.3%, rather than automatically getting the higher rate of 36.3%.
China’s commerce ministry said Tuesday it “firmly opposes and is deeply concerned” about the bloc’s ruling on tariffs on electric vehicles, which followed an extensive investigation into Chinese EVs. The ministry said in a statement that the findings of the investigation were “distorted” and vowed to “resolutely defend the legitimate rights and interests of Chinese companies.”
After the EU’s initial tariffs took effect in July, Tesla raised the price of its Model 3 in Europe by about 4%, or €1,500 ($1,666), to €42,490 ($42,177), blaming the extra fees.
However, the Model 3 is still cheaper than the BYD Seal, according to George Whitcomb, an automotive research analyst at consultancy Rho Motion. “Now, with the additional tariff reduction for Tesla, it will help the Model 3 stay competitive with other Chinese-made EVs in Europe,” he told CNN.
For its part, BYD has not raised prices in Europe yet despite the huge additional tariff.
“BYD has a much better capacity to absorb these additional tariffs because its production costs are much lower compared to its prices in Europe,” said Sebastian of the Rhodium Group, who estimates that BYD could absorb the additional EU tariff of up to 45%.
The company could also increase exports of hybrid electric vehicles, which Tesla does not manufacture, as tariffs only apply to battery electric vehicles. In the future, BYD could escape tariffs altogether by manufacturing cars in Turkey for the EU market. Imports from Turkey are not subject to tariffs.
Regardless of the high tariffs, Chinese electric-vehicle makers are unlikely to abandon Europe, which accounted for more than a third of their exports last year, more than the next five biggest markets combined, according to Citi.
Chinese automakers enjoy a “huge margin” on their sales in Europe, Whitcomb said.
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